ps10s08sol - = MC = 60 Q = 120. Total prot is (300-120)-60...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
1. Question 1 (a) P = 1. Q = 500 - 10 P = 500 - 10 × 1 = 490. CS = (50 - 1) × 490 2 . profit = 490 × 1 - 500 - 490 = - 500 (b) Revenue = TC PQ = 500 + Q . Q = 500 - 10 P . P (500 - 10 P ) = 500+500 - 10 P P = 25 . 5 - 550 . 25 2 . 04. Q 500 - 10 × 2 . 04 = 479 . 6. CS (50 - 2 . 04)479 . 6 2 = 11500 . 81. Profit = 0. Yes, there is deadweight loss. 2. Question 2 (a) Q T = 150 - 3 2 P + 50 - 1 2 P = 200 - 2 P P = 100 - 1 2 Q T MR = 100 - Q T = MC = 5 Q T = 95. P = 52 . 5. Profit = 52 . 5 × 95 - 5 × 95 = 4512 . 5. Q trojan = 150 - 3 2 (52 . 5) = 71 . 25. Q westwood = 50 - 1 2 (52 . 5) = 23 . 75. CS trojan = 1 2 (100 - 52 . 5)71 . 25 = 1692 . 19. CS westwood = 1 2 (100 - 52 . 5)23 . 75 = 564 . 06. (b) (c) MR trojan = 100 - 4 3 Q trojan = 5 Q trojan = 71 . 25. MR westwood = 100 - 4 Q westwood = 5 Q westwood = 23 . 75. P = 52 . 5 , profit = 4512 . 5 CS trojan = 1692 . 19 CS westwood = 564 . 06. (d) MC = 100. 3. Question 3 (a) 300 - Q 2 - 2 Q 1 = 60 = 300 - Q 1 - 2 Q 2 . Since both firms are identical. Thus, Q 1 = Q 2 = Q . Thus, 240 = 3 Q Q = 80. Profit of each firm is (300 - 80 - 80)80 - 60 × 80 = 6400 (b) MR = 300 - 2 Q
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: = MC = 60 Q = 120. Total prot is (300-120)-60 120 = 14400. This evenly divided between rms. (c) Its quantity and prot will be equal to the combined quantity and prot of part b. (d) Suppose the original agreement is to evenly share. Then 300-60-2 Q 2 = 60 Q 2 = 90. Prot of rm 1 is (300-90-60)60-60 60 = 5400. Prot of rm 2 is (300-90-60)90-60 90 = 8100. (e) 300-Q 2-2 Q 1 = 60 and 30 = 300-Q 1-2 Q 2 . Thus Q 1 = 70 , Q 2 = 100. (f) Firm 2 will produce, and 30 = 300-2 Q Q = 135. Firm 1 produce nothing. Price is P = 165. Firm 1 has incentive to cheat. 1...
View Full Document

This note was uploaded on 08/08/2008 for the course ECON 101 taught by Professor Hansen during the Spring '07 term at Wisconsin.

Ask a homework question - tutors are online